Capital One Resolution Plan Public Section

[Pages:16]Resolution Plans for Capital One Financial Corporation, Capital One Bank (USA), N.A., and Capital One, N.A. Section 1: Public Section December 2013

Resolution Plans for COFC, COBNA and CONA Public Section

Table of Contents

I. SUMMARY OF RESOLUTION PLANS ................................................................................................ 4 A. MATERIAL ENTITIES ........................................................................................................................... 4 B. DESCRIPTION OF CORE BUSINESS LINES.............................................................................................. 5 C. SUMMARY OF FINANCIAL INFORMATION REGARDING ASSETS, LIABILITIES, CAPITAL, AND MAJOR FUNDING SOURCES ......................................................................................................................................... 6 D. DESCRIPTION OF DERIVATIVE ACTIVITIES AND HEDGING ACTIVITIES ...................................................... 11 E. LIST OF MEMBERSHIPS IN MATERIAL PAYMENT, CLEARING, AND SETTLEMENT SYSTEMS ......................... 11 F. DESCRIPTION OF FOREIGN OPERATIONS ............................................................................................ 13 G. MATERIAL SUPERVISORY AUTHORITIES.............................................................................................. 13 H. PRINCIPAL OFFICERS ....................................................................................................................... 13 I. CORPORATE GOVERNANCE STRUCTURE AND PROCESSES RELATED TO RESOLUTION PLANNING............... 14 J. MATERIAL MANAGEMENT INFORMATION SYSTEMS................................................................................ 15 K. DESCRIPTION OF RESOLUTION STRATEGY .......................................................................................... 15

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Resolution Plans for COFC, COBNA and CONA Public Section

I. SUMMARY OF RESOLUTION PLANS

Introduction

The final resolution plan rule (the "Joint Resolution Plan Rule") issued jointly by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and the Federal Deposit Insurance Corporation (the "FDIC"), pursuant to Title I, Section 165(d), of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), requires Capital One Financial Corporation ("COFC", and together with its subsidiaries "Capital One" or the "Company"), as well as all large banking organizations, to prepare a resolution plan for COFC (the "COFC Resolution Plan"). Section 165(d) requires that all bank holding companies with total consolidated assets of $50 billion or more and certain non-bank financial companies ("covered companies") develop a contingency plan for orderly liquidation. The purpose of this provision is to provide regulators with a better understanding of a covered company's structure and relative level of complexity as well as its resolution strategies and processes. The plan also assists regulators in their supervisory efforts to ensure that each covered company operates in a safe and sound manner and does not pose undue risks to the financial system, generally.

The FDIC's Resolution Plan Rule for Covered Insured Depository Institutions (the "Bank Rule") requires Capital One to prepare resolution plans (the "Bank Plans") for each of Capital One Bank (USA), N.A. ("COBNA") and Capital One, N.A. ("CONA") as well. The Bank Rule requires that each insured depository institution with $50 billion or more in total assets prepare a plan demonstrating how the institution could be resolved in an orderly and timely manner in the event of receivership.

As required under applicable regulations and supervisory guidance, the plans consider strategies for the resolution of COFC, COBNA, and CONA under the assumption that an idiosyncratic event of failure has occurred at these entities, and assumes that this idiosyncratic event does not occur during a system-wide crisis. These plans have been submitted to the Federal Reserve and the FDIC, in the case of the COFC plan, and to the FDIC, in the case of the COBNA and CONA plans, and provide detailed roadmaps for the orderly resolution of COFC, COBNA, and CONA under such a hypothetical scenario. In the event that resolution of COFC, COBNA, and CONA were required, the fact that the vast majority of Capital One's core business lines are operated through the Company's national bank subsidiaries, COBNA and CONA, contributes to the resolvability of COFC, COBNA, and CONA under the U.S. Bankruptcy Code and the Federal Deposit Insurance Act.

More information on the strategy for the resolution of these entities is found below in Section K of this Public Section.

A. Material Entities

Capital One has identified four "material entities" for purposes of resolution planning: COBNA, CONA, Capital One Services, LLC ("COSL"), and Capital One Services II, LLC ("COSL II"). A "material entity" of COFC under the Joint Resolution Plan Rule is a subsidiary or foreign office of COFC that is significant to the activities of a critical operation or core business line of COFC. A "material entity" under the Bank Rule is a company that is significant to the activities of a critical service1 or core business line of COBNA or CONA. Capital One does not have any critical operations for resolution planning purposes.

Capital One Financial Corporation. COFC, a Delaware Corporation headquartered in McLean, Virginia, is a publicly traded bank holding company that has made an effective election to be treated as a financial holding company. COFC, through its subsidiaries, offers a broad array of financial products and services to consumers, small businesses, and commercial clients through branches, the internet, and other distribution channels. COFC is the "covered company" for purposes of the Joint Resolution Plan Rule.

1 Under the Bank Rule, "critical services" means services and operations of the bank, such as servicing, information technology support and operations, human resources, and personnel, which are necessary to continue the day-to-day operations of the bank.

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Resolution Plans for COFC, COBNA, and CONA Public Section

Capital One Bank (USA), National Association. COBNA is a national association headquartered in Glen Allen, Virginia. COBNA offers credit and debit card products, other lending products, and deposit products. COBNA is wholly owned by COFC. COBNA is a material entity for purposes of the COFC Resolution Plan and the Bank Plans.

Capital One, National Association. CONA is a national association headquartered in McLean, Virginia. CONA offers a broad spectrum of banking products and financial services to consumers, small businesses, and commercial clients. CONA is wholly owned by COFC. CONA is a material entity for purposes of the COFC Resolution Plan and the Bank Plans.

Capital One Services, LLC. COSL is a Delaware limited liability company wholly owned by CONA. COSL provides services to COFC, COBNA, CONA, and their subsidiaries, including account management, creative design, database management, legal, accounting, audit, treasury, human resources, and other operational and managerial services. COSL is a material entity for purposes of the COFC Resolution Plan and the Bank Plans.

Capital One Services II, LLC. COSL II is a Delaware limited liability company wholly owned by COSL, through which COSL provides certain services to COFC, COBNA, CONA, and their subsidiaries. COSL II is a material entity for purposes of the COFC Resolution Plan and the Bank Plans.

Exhibit A.1: Material Entities (by Each Entity Required to File a Resolution Plan)

COFC

COBNA

CONA

Material Entities

Capital One Bank (USA), N.A. Capital One, N.A. Capital One Services, LLC Capital One Services II, LLC

Capital One Bank (USA), N.A. Capital One, N.A. Capital One Services, LLC Capital One Services II, LLC

Capital One Bank (USA), N.A. Capital One, N.A. Capital One Services, LLC Capital One Services II, LLC

B. Description of Core Business Lines

Capital One has identified five core business lines for purposes of resolution planning. For purposes of the Joint Resolution Plan Rule, a "core business line" is a business, including its associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value to COFC. For purposes of the Bank Rule, a "core business line" of COBNA or CONA is a business line of the bank, including associated operations, services, functions, and support, that, in the view of the bank, upon failure would result in a material loss of revenue, profit, or franchise value to the bank.

Domestic Card. Capital One provides domestic consumer and small business card lending and other lending products through the Domestic Card business.

Retail Banking. Capital One provides branch-based lending and deposit services for consumers and small businesses and national deposit services through the Retail Banking business. Capital One services banking customer accounts through branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and the District of Columbia and through the internet.

Auto Finance. Capital One's Auto Finance business offers a wide range of automobile finance products through both indirect (dealer originated) and direct channels.

Home Loans. Capital One offers new home buyers and existing home owners a variety of mortgage products to finance new home purchases or refinance existing loans through its Home Loans business.

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Resolution Plans for COFC, COBNA, and CONA Public Section

Commercial Banking. Capital One provides commercial real estate and commercial and industrial customers with lending, deposit gathering, and treasury management services through the Commercial Banking business. Commercial Banking customers typically include companies with annual revenues between $10 million to $1.0 billion.

Exhibit B.1: Core Business Lines (by Each Entity Required to File a Resolution Plan)

COFC

COBNA

CONA

Core Business Lines

Domestic Card Retail Banking Auto Finance Home Loans Commercial Banking

Domestic Card Retail Banking

Domestic Card Retail Banking Auto Finance Home Loans Commercial Banking

Capital One organizes its principal operations for management reporting purposes in COFC's periodic reports filed with the Securities and Exchange Commission ("SEC") into three primary business segments, defined primarily based on the products and services provided or the type of customer served: Credit Card, Consumer Banking, and Commercial Banking. The core business lines that Capital One has identified for purposes of these resolution plans and the business segments that Capital One uses for purposes of COFC's periodic reports filed with the SEC are prepared for these different purposes and, as such, information included in these plans for core business lines do not, and are not intended to, correlate to business segments used for management reporting purposes, and vice versa.

C. Summary of Financial Information Regarding Assets, Liabilities, Capital, and Major Funding Sources

The following tables present (a) consolidated balance sheets for COFC, as of December 31, 2012 and December 31, 2011, from the Company's Annual Report on Form 10-K for the period ended December 31, 2012, filed with the SEC; and (b) consolidated balance sheets for COBNA and CONA, respectively, as of December 31, 2012 and December 31, 2011, from each bank's respective call reports.

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Resolution Plans for COFC, COBNA, and CONA Public Section

CAPITAL ONE FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEET

December 31,

(Dollars in millions, except per share data)

2012

2011

Assets: Cash and cash equivalents:

Cash and due from banks ................................................................................................................................................................. $ Interest-bearing deposits with banks ................................................................................................................................................ Federal funds sold and securities purchased under agreements to resell ......................................................................................

3,440 7,617

1

$ 2,097 3,399 342

Total cash and cash equivalents............................................................................................................................................................. Restricted cash for securitization investors ............................................................................................................................................ Securities available for sale, at fair value ............................................................................................................................................... Loans held for investment:

Unsecuritized loans held for investment, at amortized cost............................................................................................................. Restricted loans for securitization investors .....................................................................................................................................

11,058 428

63,979

162,059 43,830

5,838 791

38,759

88,242 47,650

Total loans held for investment............................................................................................................................................................... Less: Allowance for loan and lease losses .......................................................................................................................................

205,889 (5,156 )

Net loans held for investment ................................................................................................................................................................. Loans held for sale, at lower of cost or fair value................................................................................................................................... Premises and equipment, net ................................................................................................................................................................. Interest receivable ................................................................................................................................................................................... Goodwill ................................................................................................................................................................................................... Other ........................................................................................................................................................................................................

200,733 201

3,587 1,694 13,904 17,334

Total assets............................................................................................................................................................................................ $ 312,918

135,892 (4,250)

131,642 201

2,748 1,029 13,592 11,419

$ 206,019

Liabilities:

Interest payable....................................................................................................................................................................................... $

450

Customer deposits: Non-interest bearing deposits ...........................................................................................................................................................

22,467

Interest bearing deposits...................................................................................................................................................................

190,018

$

466

18,281 109,945

Total customer deposits .......................................................................................................................................................................... Securitized debt obligations .................................................................................................................................................................... Other debt:

Federal funds purchased and securities loaned or sold under agreements to repurchase ............................................................ Senior and subordinated notes ......................................................................................................................................................... Other borrowings ...............................................................................................................................................................................

212,485 11,398

1,248 12,686 24,578

128,226 16,527

1,464 11,034 10,536

Total other debt ....................................................................................................................................................................................... Other liabilities .........................................................................................................................................................................................

Total liabilities........................................................................................................................................................................................

38,512 9,574

272,419

23,034 8,100

176,353

Commitments, contingencies and guarantees (see Note 21 to Financial Statements in Annual Report on Form 10-K for the period ending December 31, 2012)

Stockholders' equity: Preferred stock, par value $.01 per share; 50,000,000 shares authorized; 875,000 shares and zero shares issued and

outstanding as of December 31, 2012 and 2011, respectively ........................................................................................................ Common stock, par value $.01 per share; 1,000,000,000 shares authorized; 631,806,585 and 508,594,308 shares issued as of

December 31, 2012 and 2011, respectively, and 582,207,133 and 459,947,217 shares outstanding as of December 31, 2012 and 2011, respectively ...................................................................................................................................................................... Additional paid-in capital, net ..................................................................................................................................................................

Retained earnings ...................................................................................................................................................................................

Accumulated other comprehensive income............................................................................................................................................

Less: Treasury stock, at cost; par value $.01 per share; 49,599,452 and 48,647,091 shares as of December 31, 2012 and 2011, respectively........................................................................................................................................................................................

Total stockholders' equity ...................................................................................................................................................................

0

6 26,188 16,853

739

(3,287 ) 40,499

0

5 19,274 13,462

169

(3,244) 29,666

Total liabilities and stockholders' equity ........................................................................................................................................... $ 312,918

$ 206,019

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Resolution Plans for COFC, COBNA, and CONA Public Section

CAPITAL ONE BANK (USA), NATIONAL ASSOCIATION CONSOLIDATED BALANCE SHEET

December 31,

(Dollars in millions)

2012

2011

Assets: Cash and balances due from depository institutions:

Noninterest-bearing balances and currency and coin ................................................................................................................................... $ Interest-bearing balances............................................................................................................................................................................... Securities: Held-to-maturity securities ............................................................................................................................................................................. Available-for-sale securities ........................................................................................................................................................................... Federal funds sold and securities purchased under agreements to resell: Federal funds sold in domestic offices........................................................................................................................................................... Securities purchased under agreements to resell ......................................................................................................................................... Loans and lease financing receivables: Loans and leases held for sale ...................................................................................................................................................................... Loans and leases, net of unearned income................................................................................................................................................... LESS: Allowance for loan and lease losses ..................................................................................................................................................

1,035 1,604

0 9,496

0 0

0 65,082

3,157

$

665

1,146

0 9,338

0 0

0 58,127

2,694

Loans and leases, net of unearned income and allowance .......................................................................................................................... Trading assets ...................................................................................................................................................................................................... Premises and fixed assets ................................................................................................................................................................................... Other real estate owned ....................................................................................................................................................................................... Investments in unconsolidated subsidiaries and associated companies ............................................................................................................ Direct and indirect investments in real estate ventures ....................................................................................................................................... Intangible assets:

Goodwill.......................................................................................................................................................................................................... Other intangible assets .................................................................................................................................................................................. Other assets .........................................................................................................................................................................................................

61,925 0

863 0

955 0

314 1,202 3,204

55,433 0

771 0

654 0

98 58 2,944

Total assets ......................................................................................................................................................................................................... $ 80,599

$ 71,108

Liabilities:

Deposits:

$

In domestic offices: .......................................................................................................................................................................................

Noninterest-bearing .................................................................................................................................................................................

Interest bearing ........................................................................................................................................................................................

In foreign off ices, Edge and Agreement subsidiaries, and IBFs: .................................................................................................................

Noninterest-bearing .................................................................................................................................................................................

Interest bearing ........................................................................................................................................................................................

Federal funds purchased and securities sold under agreements to repurchase:

Federal funds purchased in domestic offices ................................................................................................................................................

Securities sold under agreements to repurchase ..........................................................................................................................................

Trading liabilities ...................................................................................................................................................................................................

Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) ...............................................................

Subordinated notes and debentures ....................................................................................................................................................................

Other liabilities ......................................................................................................................................................................................................

Total liabilities.....................................................................................................................................................................................................

Equity Capital: Perpetual preferred stock and related surplus ..................................................................................................................................................... Common stock...................................................................................................................................................................................................... Surplus (excludes all surplus related to preferred stock) ..................................................................................................................................... Retained earnings ................................................................................................................................................................................................ Accumulated other comprehensive income ......................................................................................................................................................... Other equity capital components..........................................................................................................................................................................

Total bank equity capital....................................................................................................................................................................................... Noncontrolling (minority) interests in consolidated subsidiaries ..........................................................................................................................

Total equity capital .............................................................................................................................................................................................

Total liabilities and equity capital ..................................................................................................................................................................... $

41,035 218

40,817 110 110 0

6,862 0 0

17,502 2,285 4,292

72,086

0 100 4,107 4,212

90 0

8,510 3

8,513

80,599

$ 40,349 158 40,190 102 102 0

0 0 0 17,588 2,276 3,699

64,014

0 100 4,757 2,260 (25)

0

7,091 3

7,094

$ 71,108

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